News note: You may have noted that when the Senate passed Fast-Track in committee, only Sen. Kent Conrad (D-ND) was opposed. As it turns out there were several others who would have voted no save for a simultaneous vote on the Senate floor. Nonetheless, the Senate is more and more a millionaires' club, e.g., Paul Wellstone is the only Senate member of the Progressive Caucus while there are more than 70 House members. Dave ---------- BLS DAILY REPORT, WEDNESDAY, OCTOBER 1, 1997 Illustrating the tight labor markets that exist in many parts of the country, the latest state employment and unemployment figures show that increasing numbers of states have jobless rates that are below the national average. In August, there were 31 states that had unemployment rates below the U.S. average of 4.9 percent, according to data released by BLS ....(Daily Labor Report, page D-3). Consumers remained decidedly upbeat in September, especially as they looked ahead six months and said they feel optimistic about jobs and income, according to the latest report of the Conference Board ....(Daily Labor Report, page A-6)_____Consumer confidence grew in September ....(Washington Post, page D10; Wall Street Journal, page A2). Sales of new homes fell 2.2 percent in August, the Commerce Department said. But a decline in the number of homes on the market to a four-year low pointed to healthy demand in housing markets, and sales for the fist eight months of the year still are running 6 percent ahead of the same period of last year (Washington Post, page D10; Wall Street Journal, page A2). Inflation remains passive despite a low jobless rate and anecdotal evidence suggesting labor markets continue to tighten. Analysts are divided whether this near economic paradise will long continue. "I see no reason why this period of low unemployment and low inflation cannot continue," said economist Joel Popkin, president of Joel Popkin & Co. in Washington. Increased economic globalization - with developing countries tapping a large pool of labor - has put more and more supplies on the world market, driving down prices, Popkin said. But Robert Brusca, chief economist for Nikko Securities Co. International, said the service sector is the largest segment of the economy and "most services don't have international competition" to drive down prices. Brusca does not believe the combination of low unemployment, fast growth, and little inflation will continue for long ....While stories of labor shortages are widespread, the effect of accelerating wage inflation has not been widely observed in national data. The ECI has not shown an upswing in compensation costs. Analysts will closely watch the Oct. 28 release of the ECI for the third quarter for signs of acceleration ....(Daily Labor Report, page D-1). Part of the inflationary slowdown in recent years reflects ongoing efforts by the government to improve the accuracy of the CPI, says Business Week (Oct. 6, page 30). Since the start of 1995, for example, Labor Dept. statisticians have modified their treatment of rents, hospital prices, and generic drugs and altered sampling methods for food and nonfood items. These and other changes, notes economist L. Douglas Lee of HSBC Washington Analysis, have cumulatively lowered the current rate of consumer inflation by 0.2 to 0.3 of a percentage point. What's more, the process will continue in 1998 and 1999 as the government updates the weights for items in the CPI, changes the treatment of computers, and makes other modifications to reflect the prices of new goods. As a result of all these adjustments, says Lee, the reported rate of inflation in 1999 will be about three-quarters of a point below what the old 1994 yardstick would have shown - and perhaps more. But, since the government is not going back and fixing the past data, the effect is to bias inflation downward .... In recent years, a seeming paradox has bedeviled discussions regarding the labor-market prospects of college graduates, says Business Week (Oct. 6, page 30). On the one hand, a number of researchers have found that many grads are winding up in jobs previously held by those with a high school diploma ....On the other hand, the wage gap between high school and college grads continues to widen ....These two trends seem inconsistent from an economic perspective ....This is addressed by Frederic L. Pryor of Swarthmore College and David Schaffer of Haverford College in a study in the Monthly Labor Review. They analyzed data from several surveys ....They find, in sum, it is the skills college grads bring to the labor market, not their sheepskins, that determine their economic fate. "The shortage of qualified college graduates is real," says Pryor, "but the key word is `qualified.'" The Business Week (Oct. 6, page 179) forecast is for an increase of 300,000 in August payrolls and for the unemployment rate to hold steady at 4.9 percent. Health maintenance organizations nationwide project that premiums will rise an average of 4.6 percent in 1998, according to a survey by an investment bank that specializes in managed care. A year ago, HMOs were projecting a 1997 rate increase of 2.6 percent (Washington Post, page D10). With inflation firmly under control, Federal Reserve officials left short-term interest rates unchanged at a policy-making session yesterday. They declined to act even though economic growth remains stronger than most of them anticipated earlier this year ....(Washington Post, page D10; New York Times, page D1; Wall Street Journal, page A2). "When Optimism Meets Overcapacity" is the title of an op-ed article by author William Greider that asks "Who's going to buy all this economic output?" Greider says there is a "creeping recognition that deeper disorders are stalking the global economy - deeper than the business cycle" - overcapacity and deflation ....
